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Jessica Murphy, Parliamentary Bureau

Feb 23, 2012

, Last Updated: 5:12 PM ET

Canadians face stretched household budgets — even insolvency — when interest rates eventually rise or if housing prices fall, the Bank of Canada said Thursday.

In its latest warning that Canadian families are taking on too much household debt, the central bank said Canada's housing market hasn't experienced the "excesses" recently seen in countries like the U.S.

But shocks to the economy could leave stretched homeowners struggling.

"Higher levels of indebtedness will nevertheless make households more vulnerable to adverse shocks, whether they emerge from the housing market or elsewhere," the bank said in a new report on the housing market.

For the past 30 years, Canadians have been taking on more debt. The average Canadian's debt-to-disposable-income ratio — which measures the percentage of a person's after-tax annual income that would pay off all their debts — now stands at 150%.

Young Canadians especially are carrying more debt than a decade ago.

The bank reported the typical 31- to 35-year-old is now $120,000 in debt — this compared to $75,000 a decade ago.

Bank of Canada governor Mark Carney has set the key interest rate at the near-historic low of 1% since September 2010 in a bid to stimulate the economy, but it also boosted home ownership and mortgage debt.